The government wants a more efficient third sector: less dependent on state support, more involvement of volunteers, and better use of private finance. This may emerge in time, but it will not do so quickly enough for a small, vital group of local service-providing charities – where failure will be the norm.

The UK has more than 160,000 charities. Over half have annual incomes of less than £10,000; a few are national or international in scope and major brands in their own right. These will survive, either because their needs are small or because they have sophisticated fundraising machines. But somewhere between them is a smaller group of charities, which are at risk of closing. They are perhaps fewer than 5,000 in number and typically have annual incomes over £100,000 and significantly less than £1m. They deliver social services into the community – and focus on the hardest-to-reach and most disadvantaged people. Moreover, their "service delivery" usually involves significant numbers of volunteers. Unfortunately, they share another characteristic: they are overwhelmingly dependent on statutory funding, particularly local authority grants – the fastest-declining source of charity income. More than £2bn of funding will be lost from this area over the next three to four years, according to the National Council for Voluntary Organisations (NCVO).

They have often developed unparalleled expertise in their specialist areas, but their focus on providing services to high-need individuals at the local level has made them uniquely suited to, and reliant on, statutory funding.

Finding a new kind of "paying customer" may, for many, prove impossible: they lack the working capital, and often the scale, to take on payment-by-results contracts, and they have no means of generating revenue, so have no immediate prospect of making the return required by social investment.

I am a trustee of such a charity. My Voice London provides support for disadvantaged children in south London and is often their best hope of avoiding disengagement, truancy and crime. Yet, because of grant withdrawals, it is facing unprecedented financial challenges.

NCVO chief executive Sir Stuart Etherington has warned we are in danger of "knocking out the capacity that will build the government's bigger society". In my view, it is within this 5,000-strong group of charities that his endangered capacity disproportionately resides.

But it is not too late if we act fast. A government review of these charities, the services they provide and the hard-to-reach beneficiaries they serve is required. It should answer simple questions: which services provided are fundamental to society? Are alternative providers available? Are providers fit for their new environment, and how could they be made to be? What costs will accrue by allowing them to disappear?

Without this, we'll damage our society, and vulnerable people within it.

• Isobel Spencer is a third sector consultant and chair of trustees at My Voice London. isobelspencer@gmail.com